India's economic growth slowed for the fifth straight quarter in the April-to-June period to 5.0 per cent, government figures showed on Friday in a fresh blow to Prime Minister Narendra Modi.
But more importantly, the economy grew at 8 per cent in nominal terms - courtesy low levels of inflation - the slowest since the third quarter of 2002-03, taking into consideration the previous two series of national accounts.
Aditi Nayar, Principal Economist, ICRA, said the pace of expansion of GDP and GVA in Q1 FY2020 was resoundingly lower than forecast, driven by a collapse in manufacturing GVA growth, even as the performance of most of the other sectors was largely along expected lines.
Prior to announcement of GDP numbers, the government on Friday announced its second of the three-part stimulus, merging 10 public sector banks into four with a view to boost credit to help revive the economy. He added that the government was committed to reviving the economy, and claimed that the country would "very soon" be on a high-growth path. This would create the second largest lender, after the State Bank of India.
Global analytical firm CRISIL has cut India's GDP growth forecast for this fiscal by 20 basis points to 6.9 percent citing weak monsoon, slowing global growth, and sluggish high-frequency data for the first quarter.
Finance Minister Nirmala Sitharaman has said more measures to boost the economy will be announced in coming weeks. Private consumption expenditure further decelerated to an 18-quarter low of 3.1% in the June quarter, while investment demand picked up slightly at 4% from 3.6% in the preceding three months. Investment demand also remained lackluster and fixed capital formation grew 4.0 per cent (4QFY19: 3.6 per cent).
The economic downturn has particularly hit auto, manufacturing and real estate sectors.
Next in line were the usual suspects of agriculture and mining sectors, which grew at a dismal 2 and 2.7 per cent respectively.
The RBI marginally lowered GDP growth estimates for FY20 to 6.9 per cent from 7 per cent projected earlier in its June policy statement.